The Greek election yesterday brought a brief reprieve as a nation and the common European currency stepped back from the brink.
But, from the view this morning, little has changed.
Yes, the Eurozone has survived its latest test, yet there is little indication where it will go from here. Considerable continental support for the common currency remains, and EU officials will soon introduce initiatives to consolidate banking and financial policy in the European Union.
Still, the problems keep mounting, and there is very little resolve here.
At this point, there are a lot of actions (or lack of actions) that could still upset the entire apple cart.
Greece must now form a government, gain widespread acceptance of tough austerity measures, and wrestle with widening unemployment, pension shortfalls and reduced government services. Anger will not subside, especially with more than 50% of the nation's youth without a job. With prospects still looking bleak, the streets will not be any calmer.
The pro-bailout New Democracy party and its leader, Antonis Samaras, now need to form a majority coalition. Samaras must start his day today with the No. 2 vote winner, Alexis Tsipras and the far left "let-the-rest-of-Europe-go-to-hell" Syriza party.
Tradition requires that the primary vote earners discuss forming a government first. Tsipras may relent on using his newfound political strength in the interests of national unity, but I wouldn't count on it. The former communist student organizer has another agenda in mind.
Samaras and his conservatives will probably end up forming a government with the socialists. That is, itself, a clear statement on how disjointed European politics has become.
This morning, New York trading will take some profits from the run up last week and Europe will shrug off an election that has decided nothing to focus on the next sick patient—Spain. Actually, what is happening there has been on the radar for some time.
With 10-year Spanish bonds yields in excess of 7% as I write this, and the Spanish stock exchange down triple digits, the bailout provided only one week ago now seems utterly insufficient.
It is becoming evident that the EU financial markets and a weakening banking sector will not be able to stem this rising tide.
Something more needs to be done.
Kent Moors
Oil & Energy Investor
